Two-Pager: Dealing with Decoupling from China

Disclaimer: This two-pager has been prepared by the CKN Secretariat and should not be considered the work of the individuals listed as authors of the report.

Key Takeaways

• Geopolitical tensions, especially the US–China rivalry and Russia’s invasion of Ukraine, have heightened awareness of dependency risks, prompting firms to reassess exposure to China and explore mitigation strategies.
• Despite politicization and rising risks, China remains central to the global economy, with a strong manufacturing base, growing innovation capacity, and increasing self-reliance in critical technologies.
• Evidence of partial decoupling is emerging: declining FDI inflows, shifting trade patterns (notably via ASEAN), and increased diversification of supply chains toward countries like India, Vietnam, and Indonesia.
• Companies are not exiting China wholesale; instead, they combine diversification with localization strategies (“China for China”), reflecting China’s continued importance as both a market and production hub.